Time and Materials: Remodeling Costs

6Mar

A few weeks ago I wrote a column entitled “Why A Fixed Price Contract?” After reading that column a homeowner contacted me and told me a “time and materials” nightmare.

This homeowner contracted with a builder for a major remodel. The contractor told the homeowner that the project was expected to cost between $50,000 to $60,000. It would be billed on a time and materials basis with the homeowner reimbursing the contractor for the actual expenses to build the job. The homeowner was shocked at the final cost of $130,000.

The homeowner had made some changes along the way but the contractor didn’t give her any idea of what the changes would add to the job. This gave the homeowner no control over her costs and no decision-making tools when deciding what to add. In the end, the homeowner still doesn’t know how much of the additional cost was due to the changes and how much was a result of the contractor underestimating.

How do you avoid this happening to you? Insist on a fixed price contract with change orders written for any additional work. Most contractors do not intend to underestimate a project and then expect you to foot the bill for the extra costs. But if you like to know exactly what you’ll be paying, a fixed price contract is the only way to go. Ask for an itemized estimate that shows what’s going into your job. Check your contractor’s references. Above all, get it all in writing. If your contractor “forgets” to bring the contract don’t allow him to start work. Once he starts on your project you’re obligated to pay him.